Of Things Known and Unknown

U.S. Treasury Secretary Paulson admitted that the thing we don't know is,is there fraud going on,is there collusion.I won't have a view until I see the evidence,Mr.Paulson stated.Naked short-selling is wrong anywhere.Our banking system is safe and sound.I don't think you're going to see any insured depositors lose a penny.The most important thing we can do to support the dollar is have confidence in our economy,he added.In a black suit,light blue shirt and red tie,and seated before a backdrop of U.S. Treasury seals,Mr.Paulson held that America's long term prospects are strong compared with any other economy.

The Importance of Housing Reform

The housing correction needs to run its course,U.S. Treasury Secretary Hank Paulson believes.Only at that time will we be entirely through this period of stress in the financial markets.One key in the housing crisis is having mortgage finance available.Housing reform is more important in magnitude than anything else.I'm focused on the job in front of me,not what happens after the U.S. presidential election.The more flexible the authorities are,the more confidence there will be in the marketplace.Government shouldn't try to impede the correction in housing,the Secretary continued.

Special Access:With the Treasury Secretary

U.S. Treasury Secretary Hank Paulson says he is speaking,and he listens.One of the things they're going to hear is,keep marking to market,and if you need to,go out and raise some capital.Banks need to keep marking books to assets.We are seeking to show stability for the capital markets.If necessary,the Treasury is ready to put capital in the Government-Sponsored Enterprises Fannie Mae and Freddie Mac,which are so important to the stability of the capital markets,the former Wall Street executive said.

More Struggle Ahead,Economists Say

The National Association for Business Economics has released the results of a survey of economists.According to the participants,the U.S. may avoid a recession,but growth will be anemic for the rest of 2008.Jobs and capital spending will be stable,as industry demand is rising across the board.The economy will be struggling for a few more quarters.Selling prices rose at the highest rate since Q1 of 2007.Higher materials costs were reported by 75% of the participants,which is a record.Increased capital spending was expected by 40% of the economists,which is down only 2% from Q1 2008.Overall,the NABE survey charts a difficult but passable road in the medium term.This week,Gross Domestic Product and employment reports could move the markets.

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People in Cary,North Carolina and Roubaix,France are reading this.It's good to have you and all my readers along on the knowledge journey.I am committed to working through the problems,not pretending they aren't there.In that way,we will be better at the end of the crisis.Being an idealogue would not yield anything but hot air.Have an enriching session.

The Last Bear

The last bear market was from 2000-2003.It lasted a total of 31 months.During that bear market,there were six rallies,which lasted from two to four months each.The current bear market arose about a year ago.It could extend as far as 2010,given the depth and breadth of the financial crisis,and the difficulty of owning up to it.

Citigroup Trends Better

Citigroup(C),the largest U.S. financial company,has reported its Q2 results.The firm suffered a loss of 2.5 billion dollars,or .54 a share.For the past three quarters,Citi's losses have been shrinking.In recognition of this ,Deutsche Bank(DB) has upgraded Citi's stock.Its Q2 results were in line with most banks that have reported earnings,says Richard Bove of Ladenburg Thalmann.Its other sources of income are great enough to cover the losses in its loan portfolio.The banks as a group are lending plenty of money;their margins are not in distress;and they are gaining deposits.The industry is in much less trouble than people think.It has more equity,more reserves,more loans and more deposits,Mr.Bove indicated.Shares of Asian regional banks rose on Monday,their first chance to respond to Citigroup's news.On the other hand,there can still be setbacks for Citi and the other banks,investors should realize.The financial system has been shaken hard,so recovery will be a jagged process.

Michigan Saves the Dream

The state of Michigan is addressing the economic crisis.Governor Jennifer Granholm says that,for the state,we're doing everything we can to encourage refinancing of mortgages,rather than foreclosure.When you combine the auto industry restructuring and 4.00 a gallon gasoline,together with the economic downturn,it's a triple whammy for the citizens of the state.Since 2000,Michigan has lost 400,000 jobs.Michigan will be announcing its Save the Dream effort of 14 initiatives-especially in the alternative energy industry.For me,it's all about diversifying this economy,Governor Granholm explained.

S and P Top Performers

The Q2 top performers in the Standard and Poors 500 Index were Massey Energy(MEE),up 57.25,or 156.8%;and Jabil Circuit(JBL),up 6.75,or 73.5%.

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I have readers in Sparta and Englishtown,New Jersey.Welcome to you and all my business friends.Thank you for learning.Have a restful weekend.

A Candid Admission

Speaking candidly,NBC Universal CEO Jeff Zucker admitted that its theme parks are suffering from the weak U.S. economy.Attendance and DVD sales are not what they've been.Nonetheless,box office and T.V. advertising are still strong.The video content on recently-acquired Hulu is premium,quality content,so advertisers are supporting it-unlike YouTube,Mr.Zucker stated.As for the parent corporation,Mr.Zucker said that,in the past 12 months,General Electric has been incredibly supportive of NBC Universal.GE CEO Jeff Immelt has made it clear that NBC-U is an important part of the GE portfolio.There's no question that consumer-facing businesses are struggling right now,Mr.Zucker said.I think it'll hold up pretty well for us,and the flip side is that we're making acquisitions,the media executive pointed out.

Acquisition Part of Big Move

The Weather Channel is the third most-distributed cable network,NBC Universal CEO Jeff Zucker noted.NBC-U has worked with co-acquirer The Blackstone Group before-on its Orlando theme parks.They have a lot of history with them,Mr.Zucker said.Launched on May 2,1982,The Weather Channel reaches 96 million homes.They have been great in their space,have owned their space for a long time.We're just thrilled they're a part of the NBC family,Mr.Zucker enthused.Although NBC remains an important part of NBC-U,there's been a big move-we've really moved to become a cable network company.The real strength of the company has become the cable portfolio,and that's going to continue in the years ahead,Jeff Zucker predicted.

Weather Channel Deal

NBC Universal,a division of General Electric(GE),is acquiring The Weather Channel from Landmark Communications for 3.5 billion dollars.The Blackstone Group(BX) and Bain Capital are also participating in the acquisition.Jeff Zucker,CEO of NBC-U,says that they are a news and information company.The cable portfolio is the backbone of who they are.NBC-U owns MSNBC,CNBC,Bravo,USA Network,Oxygen and Sci-Fi.The digital unit of The Weather Channel,weather.com,fits in NBC-U with 40 million unique monthly visitors.The deal,which is expected to close by the end of 2008,is leapfrogging NBC-U into whole new areas,Mr.Zucker maintains.They get a great strategic asset at a very fair price.

NASDAQ Top Performers

The NASDAQ top performers for Q2 were Marvell Technology(MRVL),up 6.78,or 62.3%;and NII Holdings(NIHD),up 15.71,or 49.4%.

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I have readers in Frederick,Maryland and Peterborough,U.K..Welcome to you and all my readers.You have stayed in the financial community at a difficult time.History has shown that is truly the best course.I have added a link to Checks,labels and stationery by Current,a popular printer of personalized items.I am pleased to list them on my site.

The EU is Leading

In white shirtsleeves and a purple tie,Prime Minister Brown stated that the European Union is the world leader in development aid.As well,it is the leader in climate change reform,and in the quest for a trade deal.If we can't get one in the next few weeks,it may elude us for many,many months-if not longer.We've got to show this deal to a world that is becoming increasingly protectionist,Prime Minister Brown reflected.The iShares MSCI UK fund(EWU) gives investors exposure to the British economy.

A Massive Shift

Prime Minister Gordon Brown,who has been in office a little over a year now,observed that we are witnessing a massive shift in the world economy.It is a shift of power to Asia.The challenge of this global change is to make it both inclusive and sustainable.We are seeing the worst food shortage in 30 years.The worst thing we can do is cut the subsidies to developing countries.It would be a huge mistake to cut that aid,Mr.Brown warned.In Britain's case,we will soon be 80% dependent on other countries for gas.We have a once in a generation chance to reduce our dependence on oil.We will soon become the world's leading offshore wind energy producer.We're dealing with a massive expansion of demand for oil from Asia.China is building 100 airports a year and 1,000 cities a year,while adding 10 million cars a year.We need a new green revolution in the developing countries.You will need a body the size of the World Bank to ensure the flow of money to the developing countries for implementing climate change reform,Mr.Brown estimated.

Special Access:With the Prime Minister

Speaking with the British Liaison Committee of the House of Commons,Prime Minister Gordon Brown said the off-balance sheet activities of some banks,and the writedowns that are taking place,should never have happened.There are reforms to the financial system that are necessary,such as improved transparency,improved bond rating agencies,and a better system of global supervision of the financial flows of multinational firms.We've got no proper early warning system for the world economy.We need to be better at dealing with financial stability at a global level.Action has already been taken to improve the flow of money by the Bank of England,which has injected funds into the system.

Top Performers

The top performers in the Dow Jones Industrial Average for Q2 were Chevron(CVX),up 13.77,or 16.1%;Wal-Mart(WMT),up 3.52,or 6.7%;and Exxon Mobil(XOM),up 3.55,or 4.2%.

The B in KB Home

Eli Broad,who built Sun America and sold it to AIG for 18 billion dollars U.S.,says he thinks some of the writedowns being taken by financial firms are excessive.Mr.Broad,who also co-founded KB Home(KB Home) with Kaufman,gave his perspective on the current situation.He's not sure we're in the final innings of the financial crisis.We may be in the middle innings.Housing has to stabilize before we can recover.Consumer confidence continues to sink,and he doesn't think that will change until next year.AIG stock could be a very attractive buying opportunity once things settle down,in Mr.Broad's opinion.

A Builder of Businesses

Eli Broad,a billionaire investor who,with his associates,owns a 4% stake(27 million shares) in American International Group(AIG),has been evaluating the company's prospects.He thinks new CEO Bob Willumstad is up for the job.He's met with him,and will meet with him again.Mr.Broad believes former CEO Martin Sullivan is a good man in commercial insurance,but AIG needs greater strength in finance and investment.It's going to get that soon.AIG's retirement and investment businesses have done well for it.The firm is manageable.It's a great franchise,with great core earning power,Mr.Broad said.

What Kind of Bear Market?

Q2 has just ended,and earnings reports will soon be rolling in,so investors are wondering what lies in store for them.Analyst Phillip Roth of Miller Taback notes that we just completed a bear market in May,and we're on the way down again.It's an average bear market,which means going down to 1175 on the S and P 500 Index.It's not a killer bear like the market of 2000-2002,but the commodity markets haven't weakened at all.It could take a while before long term rates drop,which is the condition for a new bull market.If we get down near my target and we see no break in long term rates,I'm going to lower my target,Mr.Roth promised.In a bear market,there may be good days interspersed with the legs down.

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We are in the summer holidays.A special greeting to our military men and women.Because of a fiber optic cable disruption,I was unable to post yesterday.I am sorry for any inconvenience.Have a good holiday at cottage,home or wherever you are.I will not be in on Friday,Independence Day.